The implications of labor market network for business cycles

- We embed a frictional labor market with formal and informal search in an RBC model.
- Labor market networks is an important job information transmission channel.
- Network and direct search amplify the economy's response to a technological shock.
- Network search has important quantitative consequences for the business cycle.

We embed a frictional labor market with formal and informal search in an RBC model. Even in a model with exogenous search effort the interaction between formal and informal (network) search methods can help in generating more volatility in unemployment.